THUR JUNE 04 2026-theGBJournal| Nigeria’s fixed-income market presented a mixed picture on Wednesday as robust demand for Treasury bills offset liquidity pressures triggered by a record Open Market Operations (OMO) settlement, while the naira posted a modest gain against the U.S. dollar.
The naira strengthened marginally in the official foreign-exchange market, appreciating 0.1% to close at N1,363 per dollar.
The currency’s stability comes amid sustained efforts by monetary authorities to support market liquidity and maintain confidence in the foreign-exchange market, even as demand for naira assets remains elevated.
Money-market conditions tightened slightly following the settlement of approximately N3.04 trillion in OMO auctions, which significantly drained liquidity from the banking system.
As a result, the overnight lending rate edged higher by 2 basis points to 22.2%, reflecting the impact of the Central Bank of Nigeria’s aggressive liquidity mop-up operations.
Despite the tighter liquidity environment, investor appetite for short-term government securities remained strong. The Treasury bill secondary market traded on a bullish note, with the average yield declining by 2 basis points to 17.5%, indicating rising demand and higher prices for sovereign paper.
Demand was concentrated across the yield curve, particularly in the 92-day, 169-day and 323-day maturities, where yields compressed by 1 basis point, 15 basis points and 25 basis points, respectively.
The rally extended to the OMO secondary market, where the average yield fell by 6 basis points to 20.9%, suggesting investors continue to favour high-yielding fixed-income instruments despite recent declines in rates.
The strong appetite was further underscored at the Debt Management Office’s Treasury bill auction on Wednesday.
The Debt Management Office (DMO) offered N1 trillion across the 91-day, 182-day and 364-day tenors, attracting total subscriptions of NGN2.16 trillion.
The resulting bid-to-offer ratio of 2.2 times highlighted sustained demand from banks, asset managers and institutional investors seeking attractive risk-adjusted returns amid a still-elevated interest-rate environment.
Responding to the strong demand, the DMO allotted NGN1.46 trillion worth of securities, exceeding the initial offer size and producing a bid-to-cover ratio of 1.5 times.
However, auction stop rates moved higher across all maturities, reflecting investors’ demand for greater compensation amid inflation concerns and expectations that monetary policy could remain restrictive for longer.
The stop rate on the 91-day bill rose 10 basis points to 16.05%, while the 182-day tenor increased by 5 basis points to 16.19%.
The benchmark 364-day bill recorded the largest adjustment, climbing 20 basis points to 16.35%.
In contrast to the Treasury bill market, Nigeria’s sovereign bond market came under pressure as investors trimmed positions across key maturities. Average yields on Federal Government of Nigeria bonds rose 11 basis points to 15.9%, reflecting a decline in bond prices.
The selloff was broad-based across the benchmark curve. Short-dated bonds experienced the steepest repricing, with average yields rising 25 basis points, largely driven by heavy selling in the March 2027 bond, whose yield jumped 113 basis points.
Mid-curve securities also weakened, led by the June 2033 bond, while the long end of the curve saw yields climb following selloffs in the June 2038 issue.
The divergence between the Treasury bill and bond markets suggests investors are increasingly favouring shorter-duration instruments amid uncertainty over the future path of inflation, interest rates and government borrowing requirements.
While strong demand continues to support Treasury bill valuations, the rise in longer-dated bond yields indicates lingering caution over duration risk despite improving macroeconomic stability
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